What is Bullish and Bearish? A Beginner’s Guide

What is Bullish and Bearish? A Beginner’s Guide

5 min read

Market performance occurs in stages through a cycle, with these stages determining what is bullish or bearish in the period. A defining factor for the difference between these two terms is the perception of asset performance and its potential to improve or regress based on various economic factors.

The Origin of the Terms Bullish and Bearish

Learning their origins will provide a solid foundation for understanding what is bullish and bearish.

  • Bearish -The term bear market dates to the 18th century when fur traders sought profits through short-selling bear skins. In anticipation of lower prices, these traders would buy and sell skins at a set price – despite not owning any stock themselves. The risky strategy was an early form of financial speculation, with traders hoping for favorable pricing come delivery time to purchase bear skins at a lower price.
  • Bullish – The term bullish is a symbol of speculation and ambitious investors. It is an apt representation for those seeking to capitalize on rising market trends – like its namesake animal that charges forward with perennial strength and confidence.

Bull vs. Bear Market Comparison Table

Difference BasisBull marketBear Market
DefinitionBull market denotes the market condition where the prices of commodities, securities, assets, or shares grow over a period.Bear markets occur when there’s a continual decline in asset prices over a period
Market AttitudeOptimisticPessimistic
Economy StatusGrowing economyOften occurs in a declining economy
Asset PricesHigh and risingLow and falling
Market IndicatorsStrongWeak

What Do Bullish and Bearish Mean in the Modern World?

Markets are always in a tussle between long buyers (bulls) and short sellers (bears), with their actions or the prevailing majority determining the market state. A bullish market defines a period where the economy rises, whereas a bearish market denotes a regressing economy with market participants selling their assets short.

In understanding what is bullish and bearish, consider the 2017 crypto bull run and subsequent cryptocurrency winter. Bitcoin’s price in 2017 started by crossing the $1000 mark before culminating at ~$20,000. The overall positive market sentiment saw many long buyers secure their crypto positions with an optimistic outlook on its future.

Conversely, during the crypto winter in 2018, market perception dictated crypto’s performance. Investors saw cryptocurrencies as a bubble based on their meteoric rise in 2017, allowing negative sentiment to influence short selling. Bitcoin’s price fell to ~$3,000, highlighting cryptocurrencies’ bear run.

How Long Does a Bear Market Last?

Historically, bear markets are shorter than bull markets, lasting 289 days on average. The Great Depression created the longest bear market in modern history – 61 months. Recent decades have seen sharp contrast, with shorter incidents like the 90’s nine-month recession. Analysts continue to monitor these markets for any changes now and into the future as they play a critical role in dictating economic success or stagnation.

In the cryptocurrency market, market cycles have been linked to an event in Bitcoin called the “Bitcoin Halving.” Each Bitcoin Halving occurs approximately every four years, and causes Bitcoin issuance to decrease by half, leading to potential price increases.

However, market cycles are unpredictable and range from as short as a few months to several years. While it’s accepted that bull markets last longer than bear markets, there is no definitive answer on their length; reports suggest the time frame for these fluctuations is shrinking or lengthening over time.

Which is better: A bullish or Bearish Market?

What do bullish and bearish mean to investors? It signifies triggers their buy or sell strategies. The buy low, sell high approach depends on market cycles, which determine a bullish or bearish trend. Asset prices are low in a bearish market and high during a bull run.

Market Response to The Prevailing Status

The stock market attracts investors due to the continued price growth in a bull market. The positive response draws those looking to capitalize on the opportunity. Investors retreat from the marketplace and strike a negative tone during a bear market. Having experienced rapid growth, bears seek to cause fear throughout investors and wreak havoc on portfolios.

Many take pessimistic stands, seeing danger at every turn and citing every trade as another plunge in what will inevitably suffer defeat.

Media influences what is bullish or bearish through their reporting. While focusing on the negative implications, there’s rarely a positive outlook to the market scenario following a bear period. No one wants to see their assets (like in a retirement account) lose value; however, price correction is an essential part of the cycle, keeping asset prices honest (reflecting the asset’s real value).

Depending on one’s market strategy, purchasing during a bullish or bearish market may be profitable.

what is bullish and bearish market

What is Bullish and Bearish? Considering Market Cashflow

The banking sector will respond to market trends when setting interest rates. In a bullish market, interest rates are expected to drop, allowing businesses to leverage the money available and encouraging expansionary policies from Central Banks and governments.

Conversely, if the market is in a bearish state, prevailing economic conditions call for restricted usage of credit resources. The move pressures interest rates to remain steady or increase, prompting the highest authorities to act with contractionary measures.

Growing a Crypto Portfolio Despite Prevailing Market Conditions

Understanding what is bullish and bearish in various contexts makes it crucial to understand their effect on cryptocurrency portfolios. Growing a crypto portfolio, regardless of the market condition, is what every crypto owner should aim to achieve.

Bearish and bullish states provide opportunities through short-selling and buying long, depending on one’s strategy. By adopting a flexible trading approach, cryptocurrency owners can leverage whatever market condition to build their crypto holdings.

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